First, the bad news: As Alan Durning at Sightline reports, cities are increasingly applying state-authorized rental car taxes to car-sharing services. Here in Seattle, those who belong to my beloved Flexcar (or any future carsharing services that pops up) will have to pay the state rental tax of 9.7 percent starting October 1, 2007 -- bringing the total car tax to nearly 19 percent. This is a huge and unfair burden on those who have made the often difficult and inconvenient choice to live without a personal car, or owning a second one. Chicago, among a handful of other US cities, also taxes carsharing services.

The logic behind taxing a rental car is this: Rental cars, like hotels, are mostly used by people from out of town, people who don't vote or spend their tax dollars locally. It’s a relatively uncontroversial way of funding city services, (primarily convention and visitor services).

Carsharing is different from renting because it produces quantifiable benefits. Because carsharing is an alternative to owning a car, rather than an augmentation of car ownership, it takes cars off the road, reduces congestion, and reduces the total number of vehicle miles traveled in a city. And by enabling a reduction in the total number of cars in a city, carsharing lessens the air pollution burden created by cars.

With all that carsharing gives back, taxing people for using it is patently unfair. In my county, Flexcar users have begun a petition to reinstate the carsharing exemption to the rental tax. if the petition is successful, perhaps leaders in other states will get the message that carsharing should be encouraged -- not penalized.

Second, the mixed news: As reported in The New York Times a few weeks ago, the US Department of Transportation can't decide whether it wants to encourage or discourage people from driving. In August, the department seemed to imply the latter, announcing $848 million in grants to cities trying solve congestion probelms by getting people out of their cars and onto mass transit -- in many cases by imposing tolls or fees. At the same time, however, Congress continued to support a tax break that offsets part of the cost of driving to work, which saves drivers millions of dollars a year. This US tax law provision allows drivers to spend up to $215 a month in pre-tax wages on parking at work, and saves some drivers more than $1,000 annually.

Finally, the good news: Starting next year, London mayor Ken Livingstone plans to triple the London congestion tax to $50 a day for SUVs, as well as cars over a certain engine size. (A handy guide to the emissions produced by various cars can be found here.) Livingstone also plans to eliminate a tax exemption for residents, meaning that some Londoner's taxes could increase from $350 to $10,000 a year. Outside London, the suburb of Richmond recently increased the annual parking fee for SUVs to $600, the same amount SUV drivers must pay annually in national vehicle taxes. The new taxes are already paying dividends: the market for lower-emissions vehicles has doubled this year. It's further proof that simple economic incentives, and disincentives, are sometimes the most effective solutions.

The USDoT does seem to want to get people out of cars - they're the ones funding cities to provide congestion relief. The tax break you mentioned is Congress, it has nothing to do with DoT, and they can always be counted on to do the politically popular thing, right or wrong.

Posted by: justus on 11 Sep 07

"Because carsharing is an alternative to owning a car, rather than an augmentation of car ownership, it takes cars off the road, reduces congestion, and reduces the total number of vehicle miles traveled in a city. And by enabling a reduction in the total number of cars in a city, carsharing lessens the air pollution burden created by cars."

Not to sure of the reduction of miles or congestion just the number of different cars on the street, does help with parking in neighborhoods. Could reduce air pollution by providing a better maintained and fuel efficient fleet of cars. But agree that this should not be taxed!

Posted by: John on 12 Sep 07

Excellent post. As a flexcar member in Portland, OR, I can attest to many of the benefits cited in the post. I was able to sell my infrequently used pickup and downsize our family to one car because there is a flexcar pickup close to my house and I bike to work. Now there is one less full time car parked in our neighborhood. The flexcar pickup is probably in use about 50% of the time, so many others take advantage of it too.